APA Slips After The Release Of The Acquisition Update

APA Group (ASX: APA) provided an update on its acquisition by the CKI Consortium on November 8, 2018.

APA had received an unsolicited, indicative and non-binding proposal from the CKI Consortium on June 13, 2018. Under this proposal, CKI Consortium had to acquire all of the stapled securities in APA through trust schemes. After the successful implementation of the scheme, APA security holders will receive A$11.00 cash per stapled security. However, this transaction will not affect APA’s final distribution for the 2018 financial year, which the Board expects to be 24.0 cents per stapled security. The expected time for the implementation of the schemes is by mid-December 2018. If the implementation of the scheme is done any time after December 31, 2018, then in such case, APA security holders will receive an additional distribution of 4.0 cents per APA stapled security for each full month in calendar 2019 which elapses prior to implementation of the Scheme (up to, and including, March 2019). The final date for the approval of the scheme is March 31, 2019. Â

On August 31, 2018 CKM Australia Bidco Pty Ltd informed APA that the shareholders of CK Asset Holdings Limited, CK Infrastructure Holdings Limited and Power Assets Holdings Limited have voted to approve the relevant resolutions put to shareholders of each of those entities relating to the previously announced trust schemes under which CKI Consortium will acquire all of the stapled securities in APA (Schemes). The Schemes remained subjective to certain conditions, including approvals from the Australian Federal Treasurer (FIRB approval), APA security holders and the Supreme Court of New South Wales.

On November 8, 2018, APA group presented the media release by the Australian Federal Treasurer providing their preliminary view on the trust schemes under which the CKI Consortium proposes to acquire all of the stapled securities in APA (Schemes).

As per the Australian Federal Treasurer, the proposed acquisition will be contrary to the national interest. This will result in an undue concentration and foreign ownership in the most significant gas transmission business by a single company group, and Australian Federal Treasurer has provided a time period of two weeks to make final decision covering formal process. The preliminary view was provided taking into consideration the assessment, guidance and analysis provided by Foreign Investment Review Board and the Critical Infrastructure Centre, which are key sources of advice to support Government decision-making, including on investment transactions.

APA is by far the largest gas transmission system owner in Australia, carrying 15000 km of pipelines contributing 56% Australia’s gas pipeline transmission system, including 74% of New South Wales and Victorian pipelines and 64% in the Northern Territory. APA supplies gas to gas fired electricity generation assets and liquefied natural gas exports.

Australian Government remains committed towards more and more foreign investments, which help in creating job opportunities and improving living standards. The extent to which such investments should be allowed should be consistent with the national interest. Concentration by a single dominant foreign player in the gas and electricity space over the long term raises concerns and various questions that need to be addressed. Foreign investments are always welcomed by any Government and so is the case with the Australian Government, which has welcomed CK Group’s investments in Australia and its broader contribution to the Australian economy.

APA slipped after the media release, and closed at the levels of $ 8.57.

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